When do you think interest rates will go up and by how much?

[ihategeorgeosborne]

I ask this because we are thinking of buying our first house, as we have to leave where we are renting currently as the landlord is moving back in. Our rent has been very cheap for the area and we realise we've been lucky with it. However, other rents for the area are really extortionate and would be about the same as a mortgage for us now. However, we've been given a mortgage in principle, but there is quite a difference in cost between fixing for 2 and 5 years. I'd like the piece of mind of fixing for 5, but dh thinks we should fix for 2 as he doesn't think rates will go up massively in the next 2 years. I am worried about this. Just wondered what others would do in this situation.

Precious, the house is not the one we are renting, it is the one my landlord currently lives in. He wants to move back here and he has offered us theirs. It is definitely bigger inside, as it has an extension, but with a smaller garden. We are in Bath so ££££, as they never build any houses here. squirrel, we are taking out the mortgage for 22 years due to our age. It is with HSBC who we bank with and they are very strict! Thanks for that unlucky, I have to admit I don't really understand it that well, but I have been trying to educate myself more about these things over the last few years

Whatever you do - try and get one where there is no penalty for paying more than your minimum payment.
The more you pay off at the start the better ... so if you know you can afford 7% but start off at 5% - pay as though it was 7%...(as long as you won't end up having to borrow from elsewhere!).
Only had a mortgage for a few years and not for a long time but remember being shocked at how little of what we paid in the first year was off the capital - most of it was just interest...

Our first mortgage was with HSBC. They were very good, very sound.

Thanks unlucky. I think that's why dh wants to fix for 2 years as we could over pay on a lower rate. I think I'd prefer the piece of mind with a 5 year fix though. I know what you mean about the capital. I went on the HSBC website and checked their overpayments calculator, and I think after 5 years, we would have paid off only slightly less than 40k

Yes Northern, I think they are very sensible lenders, so it might be that they won't give us a mortgage anyway. I hope they do, as they have the most competitive rates for FTB at the moment. An IFA told us they couldn't match HSBC for rates. I hope they don't mind that I'ma SAHM at the moment and that we have 3dc. They said they'd lend what we needed in principle, so I guess we'll have to see. It is just more money than I'm comfortable with TBH, but short of moving away from here I don't think we'll find much cheaper. The dc do not want to change schools. We have had many tears about that lately when we've tried to discuss it. I will have to get a job ASAP

As has been said previously the best way to curb house prices is to increase interest rates.

Surely the best way would be to build enough housing to meet demand?

And IMO make buy to let mortgages a fuckton more expensive.

Have you considered opening a Nationwide current account and credit card, they do some fantastic offers for current account holders with a credit card. At one point they paid for your survey and legal fees, you could overpay for free and all sorts.

Our mortgage is with HSBC and I've been very impressed. Last month I called them because I noticed that the rate on their lifetime tracker mortgage had come down. We have that mortgage product. They just changed our interest rate for the lower rate over the phone without hesitation.

Can't be soon enough. Small rises next year and then I think in 2016 steeper until they are around the 4% mark by New year 2017

I didn't just guess this have old boy friend who used to write economics page in broadsheet who advises me from time to time.

Thanks all for your replies. Sorry, been out for the day and just got in. Judging by most of your comments and my own gut feeling, if we do decide to buy this house, we should fix for 5 years rather than 2. If we don't buy this house, I guess we are stuck renting for the foreseeable. It boils down to whether we want to take our chances with another landlord or take our chances with the Bank of England.

Having thought about it again though, if rates start to rise more steeply in 2016, maybe we should fix for 2 years and then 5 as my dh thinks. The problem with that though could be that there aren't any decent 5 year fixes by 2016 and then we'd be stuck. This current fix with HSBC is 3.5% for 2 years or 4.5% for 5 years. As we only have a 10% deposit, it does seem that HSBC do have the best offers at the moment. I also hope that as we've banked with them since we were at University that that might make a difference to how they view us as a financial risk. I think we have been good customers. I guess they must too to have given us a MIP. I had a Griffin savers account with them when I was 11, so I've banked with them for 30 years! I just wish I knew what was going to happen. I still can't imagine the government will let all these new HTB purchasers go to the wall, as it was their idea to implement this scheme in the first place

Can you really not imagine a government allowing Help to Buy borrowers (for which read, "people who can't really afford to buy but are set on doing so regardless, and whose votes might swing the next election") 'go to the wall'? Really?

If so, I would strongly counsel you against buying. You don't have to go very far back in history to find governments 'allowing' people who have borrowed recklessly to lose their houses. Don't buy a house that you won't be able to pay for when interest rates return to normal levels, and absolutely don't buy with the expectation of a future bail-out from a benevolent government.

I don't expect a bailout Finance. I am not using help to buy. We have saved our own deposit ourselves. I hate this government for what they have done with help to buy. I would have preferred house prices to have found their own way, without any help from government what so ever, but Osborne can't help himself. He is totally inept as chancellor and he should have steered clear from the housing market. All he has done is made things ten times worse for people like me.

Also finance, if you strongly suggest I don't buy a house, what do you suggest people like my family do? We are otherwise trapped with a lifetime of BTL landlords and having to move when ever they feel like having their house back.

Irrespective of your mortgage financing plans, you state in your previous post that you can't imagine the government 'allowing' over stretched homebuyers to lose their assets. That's a foolish assumption, and one that isn't borne out by recent history.

Incidentally, I don't think you can lay the blame for spiralling house prices entirely at Osborne's door. It's a supply side problem: too much cheap money loaned to people who won't be able to pay it back when rates increase slightly.

I repeat: if you can't afford your mortgage (which at 4 x income is big) when rates return to 6 -7%, you can't afford to buy.

Are you suggesting that government policy should be set such that everybody is given the means to buy a house so that they don't have to be 'trapped in a lifetime of BTL landlords' (your words)?

There is such a policy, or one very like it. It's called Help to Buy. You don't like that, though, do you?

Or are you special, unlike the many other people who can't afford to buy right now?

Face it. At times in the cycle, houses are too expensive for average people to buy. The smart thing to do is rent until prices return to normal levels. Which they will, when interest rates rise and the supply of money dries up.

We bought last summer and fixed for 2 years. Similar situation to you-10% deposit so the banks were offering us a pretty poor rate of interest which I didn't really want to take on for 5 years. I think we made the right decision and when we re mortgage in summer 2015 will take on a longer fix.

If I was you and buying in the next few months though, I would seriously consider the 5 year fix. I agree with others on this thread that interest rates will probably go up 2015/2016. We're currently on just under 5%, so hopefully with a bit more equity we won't be worse off.

It's all a gamble though!

I think the op is suggesting that the housing market has been artificially propped up by schemes like help to buy and very low interest rates, and this has made waiting it out impossible.

Government policy should never have been to encourage a housing bubble.

"...if you strongly suggest that I don't buy a house, what do you suggest people like my family do?" rather points to a desire for somebody else to provide the solution, doesn't it?

Waiting it out is not impossible. People have done it before. Anybody who resisted buying an overpriced house in the late 80s could snap one up very reasonably in the 1990s.

Also, the government didn't have to do much to encourage a housing bubble, did they? Lenders were hardly begging for business; they had a steady stream of lemmings desperate to get themselves into loans they couldn't service. Yes, it's nice to have your own house, but not if it's financed by reckless borrowing.

Financeprincess I agree with every word you say. I cannot believe the times i have heard people say 'but they can't raise rates' as if they are somehow entitled to this ridiculous low IR.Borrowers have had it good for several years it is rewarding over borrowing from what I can see otherwise people wouldn't be so scared of rises.Affordability s going to be strictly checked though which is a good thing. I agree work out what your repayments could be at 6-7%. The banks need to refinance with savers rather than this ridiculous QE.Whole thing drives me mad.

Thanks Fruit, I agree with you. Finance, I have waited it out for the last 7 years, thinking that prices would return to normal. Never in a million years did I think that base rate would stay at 0.5% for 5 years and that this government would do every thing they could to keep the ponzi going. They have surpassed themselves and I stand corrected. If we do buy, we will fix for 5 years. We will then have 18 years left to go. I will be working by then myself and dh will most probably be earning more too. If I keep on renting and house prices continue to rise and IRs stay low, I will be no better off and we'll be nearly 50.

If the worst comes to the worst, I'll take in a lodger. There are plenty of foreign language students looking for accommodation here. There are always other options if the shit really hits the fan. We will have to be resourceful

I used to have foreign language students It was really good fun and the money was generous (plus they stay 2 weeks at a time so if you don't like it its not too long!)

Just take a step back and remember that the rates being 0.5 percent are nothing to do with the government wanting to help out those with mortgages. They are this way to encourage businesses to borrow money to invest and thus create jobs and wealth.